1976 (11) TMI 91 - AT - Income Tax

Summary

Issues:
1. Validity of property acquisition under section 269F(6) of the Income-tax Act, 1961.
2. Allegations of collusion and under-stated sale price in property auction.
3. Violation of principles of natural justice in considering evidence without cross-examination.
4. Curability of defects in the acquisition order.
5. Impact of unauthorized commercial use by tenants on property value.

Analysis:
1. The appeals were filed against the acquisition of a property under section 269F(6) of the Income-tax Act, 1961. The property located in New Delhi was owned by three individuals who each held a one-third share. The property was claimed to have been sold in an auction to a buyer for a total consideration of Rs. 1,35,000, with sale deeds executed separately for each owner's share.

2. The Inspecting Assistant Commissioner raised concerns about the auction process, alleging collusion and under-stated sale price. He conducted inquiries and concluded that the auction was rigged and the sale price undervalued. The evidence provided by individuals involved in the auction was scrutinized, including the denial of participation by one bidder, Jagan Nath.

3. The counsel for the assessee objected to the consideration of evidence without giving an opportunity for cross-examination, citing a violation of natural justice principles. The Departmental Representative acknowledged the procedural flaw but suggested that it could be rectified by remanding the case for further examination.

4. The Tribunal found the procedural defect to be curable and decided to remand the case to the Inspecting Assistant Commissioner for proper cross-examination of the relevant witness, Jagan Nath. The Commissioner was instructed to allow the transferors and the transferee to cross-examine Jagan Nath after summoning him, with a report to be submitted to the Tribunal afterward.

5. Another issue raised was the unauthorized commercial use of the property by tenants during the sale, potentially impacting the property's market value. The lack of evidence regarding the nature of the tenants' use led to a directive for the Commissioner to gather evidence on the tenants' activities and report on whether the commercial use was lawful.

6. The Commissioner was given a sixty-day deadline to submit the remand report, after which the appeals would be scheduled for further hearing based on the new evidence gathered.